The Next (Lack Of) Trading Casualty: Nomura's Brand New $270 Million Trading Floor

Over the past several months (and years) we have been warning that the ongoing collapse in trading volumes, in part due to the lack of faith in capital markets that now have all the integrity of a rigged Vegas casino from the 1960s, in part due to investors' need to monetize assets in a world in which wages simply refuse to keep up with prices, will have not only irreversible implications on the shape of market structure, but also substantial consequences when it comes to the layout of modern banks, and associated up and downstream variables, such a jobs, real estate, support professions, municipal taxes and much more. Nowhere is this more evident (for now at least) than in the massive corporate reorganization taking place at Nomura's American division, which among many other things is about to lose its brand new $270 million trading floor even before a single trader set foot in it.

Nomura Holdings' decision to scale back its equity trading business halts its ambitious U.S. growth plans and creates a Manhattan real-estate conundrum for Japan's biggest brokerage.

Nomura said Thursday it will move its equities execution business in the Americas, Asia and Europe to its New York-based Instinet arm as part of a broader cost-cutting plan. It will no longer buy and sell stocks using its own capital, but instead match clients' buy and sell trading orders through Instinet.

The shift reflects a broader effort by brokerage firms to reshape equities operations that have been battered by years of low trading volume and falling commissions. Companies ranging from Bank of America and Goldman Sachs to much smaller firms have been hit, and many have been trimming large, capital-intensive operations.

And while jawboning (so prevalent lately) and threatening of layoffs is one thing, it is something totally different to see what it means in practice:

The firm recently signed a 20-year lease to accommodate the growth it expected in New York. It is moving next July from lower Manhattan into 820,000 square feet spread over 16 floors to a Midtown building called Worldwide Plaza. Nomura has already spent $270 million preparing the space for trading and other operations.

As recently as May, a senior Nomura executive in the United States said the new space would allow the firm to increase staffing by another 50 percent.

That's unlikely to occur. Nomura said Thursday the Americas will bear 21 percent of its cost cuts. Personnel cuts will account for about 45 percent of the global savings, Nomura said. Specific decisions about layoffs have not yet been made, according to a spokesman.

In other words kiss the principal equity trading group goodbye, in process reducing market volumes even futher. So who will survive? The ultra low, flow margin business Instinet which Nomura bought for $1.2 billion in 2007.

For more than a year, equities traders and salespeople had expected Instinet to be folded into Nomura's broader securities operation, which includes research from 17 analysts. The Japanese firm bought Instinet in 2007 for about $1.2 billion, and in the past year has cut about 200 employees to cope with shrinking profits as trading volume and commissions fell industrywide.

Now, though, Nomura's business is being folded into Instinet, which itself recently moved into almost 100,000 square feet on three floors in another Midtown building, which it had leased until August 2020.

Nomura will continue to offer "non-execution" services such as lending to hedge funds, selling convertible securities and offering futures and options through its equities unit, but the majority of its employees are involved in trade execution.

Instinet executes about 5 percent of equities traded in the United States, and expects its market share to grow after the Nomura integration. However, the overall pie is shrinking.

...

"Agency brokers" such as Instinet, which do not trade with their own capital when buying or selling from clients, generate very thin profit margins that have been squeezed further by three years of declining trading volume and a decade-long plunge in commission costs.

Trading commissions paid by mutual funds, hedge funds and other institutional traders have slipped from about 15 cents a share in the 1970s to less than a penny a share over electronic systems such as Instinet.

Global fees paid by clients for trade executions dropped from $300 billion in 2007 to $220 billion in 2011, according to consulting firm Oliver Wyman.

Considering that Knight's near death experience in the beginning of August resulted in stock volumes dropping to decade lows in the month, all that remains is for Instinet to go dark next, which it most certainly will once the group no longer generates any profits as the race to the margin bottom among agency brokers begins in earnest, which in turn will make the already broken equity market completely uninhabitable and a trading venue merely for Bernanke and his ilk, whereby the Princeton professor does all in his power to push the mark to myth value of America's very much insolvent pensions and retirement accounts into the stratosphere to perpetuate for at least a few more year the illusion that America's welfare state is not totally and utterly broke.

As for Nomura's traders about to start receiving unemployment benefits, we have good news: consider this a first adopter advantage - you will have some extra time to learn valuable skills which none of your competitors currently sitting behind Bloomberg terminals but who too will soon be seeing pink slips, have, and will thus be at least modestly more marketable in a new normal in which nothing is what it used to be.

A 72-year-old man having a tumour removed from his kidney died after the chief anesthetist and nurse took a lunch break in the middle of the surgery.

The incident, which took place at the Lidköping hospital, has prompted stinging criticism from Sweden's National Board of Health and Welfare (Socialstyrelsen).
The 72-year-old went under anesthetic at 10.45am on the day of the operation, which took place in January 2011.

At noon sharp, the head anesthetist left the operating room to go for lunch. Fifteen minutes later, the head nurse anesthetist also left the patient and went for lunch.

That's not socialist, that's just stupidity. I've worked for companies in capitalist/democratic situations (especially in banking) where staff were given verbal and written warnings if they didn't take lunch at a specified time.

I can’t imagine it means anything cheerful that Vladimir Putin, the Russian czar, is stockpiling gold as fast as he can get his hands on it.

According to the World Gold Council, Russia has more than doubled its gold reserves in the past five years. Putin has taken advantage of the financial crisis to build the world’s fifth-biggest gold pile in a handful of years, and is buying about half a billion dollars’ worth every month.

No one else in the world plays global power politics as ruthlessly as Russia’s chilling strongman, the man who effectively stole a Super Bowl ring from Bob Kraft, the owner of the New England Patriots, when they met in Russia some years ago.

Putin’s moves may matter to your finances, because there are two ways to look at gold.

On the one hand, it’s an investment that by most modern standards seems to make no sense. It generates no cash flow and serves no practical purpose. Warren Buffett has pointed out that we dig it out of one hole in the ground only to stick it in another, and anyone watching this from Mars would be very confused.

You can forget claims that it’s “real” money. There’s no such thing. Money is just an accounting device, a way of keeping track of how much each of us produces and consumes. Gold is a shiny and somewhat tacky looking metal that is malleable, durable and heavy. A recent research paper by Duke University’s Campbell Harvey and co-author Claude Erb raised serious questions about most of the arguments in favor of gold as an investment.

But there’s another way to look at gold: As the most liquid reserve in times of turmoil, or worse.

The big story of our era is not that the Spanish government is broke, nor is it that Paul Ryan apparently feels the need to embellish his running record. It’s that the United States, which has dominated the world’s economy for several lifetimes, is in relative decline.

As was first reported here in April of last year, according to International Monetary Fund calculations, the U.S. is on track to lose its status as the world’s biggest economy—when measured in real, purchasing-power terms—to China by 2017.

We will soon be the first people in two hundred years to live in a world not dominated by either Pax Americana or Pax Britannica. This sort of changing of the guard has never been peaceful. The declines of the Spanish, French and British empires were all accompanied by conflict. The decline of British hegemony was a leading cause of the First and Second World Wars.

Ever seen stocks twits? It's the highest concentration of socially networked billionaires I've ever seen! You should have seen that shit today, everyone was killing it because every single one was levered long QQQ and SWHC going into today.

You have a point. Maybe Nomura should simply wrap up its trading floor with a big red ribbon and offer it to the Smithsonian, now, for a tax writeoff, so future generations can actually see what that ancient primitive custom called "stock trading" looked like.

I knew a FX trader who worked for BoJ years ago, he did mention to me when he worked there at the time, the floor also had a "dummy" look. Meaning? It was half just to show clients i.e look impressive, phones weren't even connected on some desks.

Hey guys.....um thanks for building and retaining our clients in these difficult times. We got this order matching engine with fancy algos....we no longer need carbon based traders...If you guys can be out of here by 4pm today that would be great.....you can put your Blackberrys in that box over there on your way out.

Decisions such as these demonstrate the DEFLATION that we should be praying for in markets where there's simply zero demand and yet with enough money printing and zero interest rate policy, the toxic combination makes return on capital investment NEGATIVE and this marginalization trend is likely to remain uncomfortably persistent for another 5 years or so while we soak up all of this excess capacity. Should the government try and stimulate more.....this process will remain ELONGATED as more and more malinvestment occurs at the expense of actually prudent, profit earning capital expenditures. research@pamria.com

The crazy BoE has been pumping money into the silly UK economy. Probably one of the places in Europe that will be a no go zone once the region collapses. And that is real soon unless the Brits find oil somewhere.

boe are obsessed with QE, i have no faith in the UK economy, except the fact they would benefit from a EU breakup (gilts/GBP bid). I actually have no interest in Europe apart from index lows to buy on. I think the whole region has lost it's mind (collectively). as usual the market is only pricing in more madness from central banks. I am betting that inflation/food riots will erupt soon. Probably globally at the same time.

So, in a thinning-volume market, where capacity, once taken off-line, does not come on line instantly, how does one unload, say pension fund holdings, in order to buy real goods such as food, especially in a hurry?

A long time ago came a man on a trackWalking thirty miles with a pack on his back And he put down his load where he thought it was the best Made a home in the wilderness He built a cabin and a winter store And he ploughed up the ground by the cold lake shore And the other travellers came riding down the track And they never went further, no, they never went back Then came the churches then came the schools Then came the lawyers then came the rules Then came the trains and the trucks with their loads And the dirty old track was the telegraph road Then came the mines - then came the ore Then there was the hard times then there was a war Telegraph sang a song about the world outside Telegraph road got so deep and so wide Like a rolling river. . . And my radio says tonight it's gonna freeze People driving home from the factories There's six lanes of traffic Three lanes moving slow. . . I used to like to go to work but they shut it down I got a right to go to work but there's no work here to be found Yes and they say we're gonna have to pay what's owed We're gonna have to reap from some seed that's been sowed And the birds up on the wires and the telegraph poles They can always fly away from this rain and this cold

half the nomura articles are complete bullshit and they can't even understand the future of their own business

and of course, it is all someone else's fault!

b/c the "markets" aren't like they usta be before TBTF and the criminals get the bail in the mail; they didn't liquidate the fukers b/c of a "political" decision

and shit happens when moronic asswipes do dumbass things

here's another firm of know-it-alls which can't make a dime right now and has "guessed wrong"

but if thePeople had not bailed out the TBTF would nomura have even survived this long?

you can't have it both ways; and the pols went the other way in 2008

"they" may hafta liquidate sooner or later; who can tell at this point?

look at telecommunications and phones and hand-helds and "apps"

the "markets" are changing just as fast; slewie was trading with an atari 800 in '79; it had a phone modem i put the handset into; two "cups" held the earpiece and mouthpiece and "talked" to the dowJones computer somehow, sending little busloads of data around

i usta punch up a buncha option prices and record the incoming on my betaMax then replay the video to see what i had "downloaded"

no shit

it cost $60/hour to hook up to dowJones with 1 min minimum; yers trooly was less than a minute-man back then too! Hahaha!

the wsj had the option prices for ny, philly, sf, and chi-town and i usta haft go 4 miles to the post office every morning to get it outa the early mail

i just played thru almost 500 players in a card tourney to come in 6th; data flying everywhere; flushes, boats, quads! bad beats all over the place; people throwing chips around like hand grenades; morons bluffing and hitting runner-runner inside straights! just like always, if you must know... fun too, but i didn't win. again